Page 126 - Sustainable On-Site CHP Systems Design, Construction, and Operations

104 CHP B a s i c s

The subject electric power providers must either provide the stated level of CHP
power themselves or purchase Class III renewable energy credits from qualified and
registered CHP owners which will provide an additional income to the CHP system
owner further enhancing the value of the system. Approved Class III credits are equal
to at least 1 cent/kWh with the revenue for these credits being divided between the
owner and the state Conservation and Load Management Fund. The division will
depend on system location, type of customer, and level of state support involved.
The recognition of CHP as a renewable energy resource and, more importantly the
monetization of power output from CHP using renewable energy related funds is rela-
tively new but gaining ground. There is some concern among states that the renewable
energy portfolio targets already declared may be very difficult and expensive to achieve
using only solar, wind, biomass, or other traditional renewable sources. Inclusion of
CHP as a renewable source will significantly improve the chances of meeting these
targets without adding high costs and also provides for clean energy systems that can
produce continuous power regardless of weather conditions. This is particularly true
for states that do not have the benefit of high solar insolence or wind resources through-
out the year.

German CHP Feed-In Tariff
Germany passed a Cogeneration Act in 2002 that provides production incentive
payments for CHP plants (new or refurbished) that feed electricity into the grid.
The act provides additional payments for power produced on top of the wholesale
market rates and is funded by a levy on residential and industrial electricity users.
Payments vary according to type and size of plant and range from over 1 to approx-
imately 2.5 Euro cents/kWh for new and refurbished CHP plants with payments of
over 5 Euro cents/kWh for CHP plants under 50 kW or using fuel cells as the prime
mover. Payments were originally designed to be progressively reduced and phased
out by 2010 but a review of the program in 2006 showed that CO reduction targets
2
resulting from the program would be missed for 2010. This combined with revised
and more stringent national greenhouse gas emission reduction targets are expected
to lead to an extension of the current program beyond 2010.

Utility Programs
Many utilities in the United States have recently begun to look favorably at CHP as a
way to avoid expensive grid upgrades as well as provide their customer base with more
options on energy supply. While there has been some reluctance by electric utilities to
embrace CHP in the past, many now offer programs that identify efficiency opportunities
in client facilities including CHP.

Future Policy Development
Since the PURPA regulations were enacted in 1978 there have not been significant pol-
icy changes to assist the development of CHP at the federal level until the recent invest-
ment tax credit allowance. In the interval, deregulation of electricity supply and
restructuring of the power market led to significant changes in the utility business
model as well as customer options on energy supply. States such as California and New
York began to develop policies supportive of CHP over the last two decades with more